Decisioneering is to add real options-based analysis to its Crystal Ball financial modeling software. Real option analysis is similar to conventional net present value (NPV) and return on investment (ROI) calculations, but adds an extra dimension to financial modeling. For many projects, participants may acquire the right, but not the obligation, to invest.
Drill or drop
At any time participants have the option of carrying on financing, or of dropping out of the project. In oil exploration such ‘options’ may or may not be exercised as and when new information about an asset becomes available. If you can afford to wait until a well is drilled on a look-alike prospect on the block next door, and then to drill or drop, then the uncertainty and financial exposure of your investment will be greatly reduced.
Crystal Ball Real Options (CBRO) will be launched on December 15th. According to Decisioneering, interest has already been expressed by BP, and other majors. A link from Merak’s Peep to CBRO will also be announced. More from www.decisioneering.com.
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